"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Monday, October 20, 2014

Here are the latest numbers on the harvest from USDA.Corn - 93% of the crop is mature compared to 87% last week and 93% last year at this time. The five year average is 94%.31% of the crop is in the bin compared to 24% last week and 38% last year at this time. The five-year average is 53%.Soybeans - 95% of the crop is dropping leaves compared to 91% last week and 93% last year at this time. The five-year average is 97%.53% of the harvest is done compared to 40% last week and 61% last year at this time. The five-year average is 66%.The weather looks very conducive to rapid harvest progress this week so expect to see some pretty strong progress by the time next Monday rolls around and we get more of these numbers from the USDA. As of now, skies should be clear with lots of sunshine through Sunday at least. There is some fund buying in these grains for some reason that I cannot seem to put a finger on. Might be some more of that supposed rotation out of stocks and into what is viewed as "cheap" ags but that still seems a rather irrational reason for professional funds to throw money into a market. That big down day we had in the Dollar last week threw the macro trades into some convulsions and I suspect we are still encountering some residual fallout from that move in the currencies for mere technical reasons.There is apparently a contingent of large speculators who seem to enjoy buying the grains nearly ever evening in the Asian session as they go stop hunting after shorts in the market. Whomever it is that has been doing this, has been at it for some time now. We are seeing more of it this evening as I type these comments. I should note that guys like me who trade the livestock markets heavily have been complaining to the CME for several years about the antics occurring in that sector during the thinly traded Asian hours. After getting an earful from the industry participants as well, many who got sick and tired of watching their hedges get blown all to kingdom come for no apparent reason other than specs moving the markets around because they can do so, CME finally has moved to end the Asian trading of livestock. As of next week, FREEDOM is the new word for we long-suffering livestock traders. Perhaps enough of the grain market participants can begin to make some noise about this same thing and maybe get the exchange officials to cut these insanely long grain trading hours back to size as well. I have to give credit to the exchange - it took them a long time but they did listen and they responded! Hey guys - take a look at the grains now and let's shorten these trading hours. All we are getting in the Asian trade is hedge fund games.By the way, for those who happen to keep an eye on cattle every now and then. They were limit up today. Limit down, limit up, limit down, limit up... I am having difficulty recalling ever seeing anything quite like this in the cattle. Some quick comments on gold... the chart is showing the bulls currently in control of the market as they have been able to take price through two resistance zones on the chart. The first was near $1220; the next was near $1240. Just above the latter resistance zone, the 50 day moving average comes in near $1246. From a purely technical analysis aspect, bulls have a shot at making a run to near $1280 if they can manage to post two consecutive closes above that 50 DMA. The reason is because of the internal structure of the market with a fairly good sized contingent of hedge funds on the short side of the market.

The problem with this market for someone such as myself who likes to view a range of inputs in markets I am analyzing, is that fundamentally, the case for gold is not compelling. I am not alone in this view as the GLD continues to rapidly bleed out gold. The latest reported holdings out of that ETF, showed a sharp FALL in gold holdings of more than 9 tons from Friday! Clearly rallies in gold are being viewed as selling opportunities by some very big entities.Total tonnage is now down 46.26 tons from the start of the year and is the lowest reported level of holdings since early November 2008! Think about that - it was only a month or so after the news of QE 1 was announced that the amount of gold was anywhere near current levels being reported in GLD.

In spite of this, gold over at the Comex continues to squirt higher. We also have the VIX coming down somewhat indicating a lessening of fears over equities, at least for the moment.

Here is the most current TIPS spread chart... notice that gold has been moving higher and inversely to the spread for the last week or so - something out of the normal pattern we have come to see over the last few months. This is suggestive of gold functioning as a safe haven, NOT from inflation ( which the market is not the least bit concerned about ) but rather as a place to park some funds for those who have been getting nervous over the wild price movements in the equity arena.

What this suggests to me is that any sign of stability in equities and/or a falling in the VIX, is going to spur selling in gold once more. Falling tonnage in GLD, a falling TIPS spread and a falling VIX do not bode well for gold. If one could tell me what these three things just mentioned will do the next day, or the next or the next, I think I would have a pretty good idea what to expect from gold but since none of us know for certain what we are going to get, especially in the way of stock market moves, the jury is out on gold with the short term technical dictating the price action at the moment.Also, the Dollar is back down near the low end of its 85-87 range. What it does will also determine what gold will do. Tell me what the Dollar will do tomorrow, and I will tell you what gold does. In other word, short term technical will rule this market while traders wait for other fundamental inputs to plan their next approach to the metal.

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About Me

Dan Norcini is a professional off-the-floor commodities trader bringing more than 20 years experience in the markets to provide a trader’s insight and commentary on the day’s price action. His editorial contributions and supporting technical analysis charts cover a broad range of tradable entities including the precious metals and foreign exchange markets as well as the broader commodity world. He is a frequent contributor to both Reuters and Dow Jones as a market analyst for the livestock sector and can be on occasion be found as a source in the Wall Street Journal’s commodities section as well as CBS Marketwatch where his views on the gold market can often be found.
He is also an avid beekeeper.

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